January 15, 2013

Details of the MOU for the pilots unions at American and US Airways are released

The Allied Pilots Association released key details of the memorandum of understanding that it approved in late December.

Among the highlights includes an additional $522 million in contractual improvements over the six-year term of the pilots' contract. The money will likely come in the form of pension, pay or per diem rates and translates to about $87 million per year of the contract. The half a billion dollars is in exchange for no profit sharing.

The MOU also decreases the amount of domestic code-sharing. In the APA contract approved in December, the pilots agreed to allow American to have up to 50 percent of its domestic flying in code-share agreements. The MOU caps domestic code sharing at 15 percent. American had asked pilots for expanded codesharing so it could increase its agreements with other carriers like JetBlue, to help it gain market share on the East Coast. Since US Airways already has a strong presence on the East Coast, it is likely that a merged carrier would not need expanded code sharing agreements.

In December, APA participated in
negotiations to develop a memorandum of understanding (MOU) addressing issues
related to a potential merger inside bankruptcy. The talks were facilitated by
the Unsecured Creditors’ Committee and included senior management from US
Airways and AMR, as well as negotiators from the US Airlines Pilots Association
(USAPA). We worked very closely with the USAPA Negotiating Committee throughout
this process. The APA Board of Directors voted on Dec. 29 to approve the MOU by
a vote of 11-5. The USAPA Board of Pilot Representatives approved the MOU on
Jan. 4 by a vote of 11-0.

The document replaces the
conditional labor agreement (CLA) negotiated with US Airways management in April
2012 and serves as a Merger Transition Agreement.

The MOU starts with the APA
2012 Collective Bargaining Agreement (CBA) as the baseline contract for all
pilots, and allows APA to make $522 million in contractual improvements ($87
million per year over six years).

USAPA pilots will be
covered under the modified APA 2012 CBA on the Effective Date, which will be the
date the Plan of Reorganization is approved by the bankruptcy court.

A timeline is established
for negotiating a Joint Collective Bargaining Agreement (JCBA) with USAPA
participation until such time as one union is certified by the National
Mediation Board (NMB) to be the collective bargaining representative of the
combined pilot craft or class, at which time the duly-certified representative
shall have the exclusive authority to negotiate the JCBA on behalf of the
pilots.

For USAPA, the JBCA will be
a new contract. For APA, the JCBA will be an amendment to our current contract.

APA must file a
single-carrier petition with the NMB within four months of the Effective Date of
the MOU.

Provisions and procedures
are established for a Seniority List Integration process in accordance with
McCaskill-Bond.

The MOU provides initial
flying protections until fence provisions are established as part of the
Seniority List Integration process.

All existing AA aircraft, including
orders and options, will be flown by current APA pilots.

All existing US aircraft, including
orders and options, will be flown by current USAPA pilots.

US Airways pilots will fly the first
thirty E190 aircraft and starting with the 31st E190, APA will
receive two E190 aircraft for every additional E190 above thirty flown by US
Airways pilots.

Shuttle operations (BOS-LGA-DCA) will
be flown by current USAPA pilots, along with existing PHX-Hawaii
flying.

All transpacific (Asia) flying will
be performed by current APA pilots.

Minimum block hour floors
are established at US and AA to prevent the new company from drawing down either
operation at the expense of the other. Pay protection is provided for pilots
subject to displacements (subject to contract modification and valuation
phase).

If either US Airways or
American Airlines is hiring, furloughed pilots on either side may volunteer to
fly for the other operation. Furlough protection will be provided to all pilots
at both operations, who are senior to the most junior active pilot on the
Effective Date.

Carried over from the
Conditional Labor Agreement are provisions that transition our vacation accruals
and daily values to the America West structure (daily value of 3:40), as well as
the provision that flights over 16:00 hours will be manned by two captains and
two first officers. Similar to the CLA, the MOU has no provision for
profit-sharing.

The APA 2012 CBA Section 1
will preserve the limit for regional feed aircraft of 76 seats and 86,000 lbs
and will grandfather seventy-six aircraft which are below 86,000 lbs but
currently flying with more than 76 seats. Total regional operations will be
limited to 75% of the mainline narrow-body fleet count and large regional
aircraft (66-76 seats plus grandfathered) will be limited to 40% of the mainline
narrow-body fleet count in 2016 and thereafter. Domestic code-sharing will be
limited to 15% (down from 50% in our current contract). The international
baseline will be updated to include international hours flown by US
Airways.

The MOU also requires the
new company to uphold the arbitration decision outlined in LOA 12-05 that will
address the elimination of Supplement CC and the drawdown of the STL pilot
base.

Contract
Modifications

As mentioned previously, the MOU
gives APA $522 million to spend on contractual improvements, subject to a
valuation phase and arbitration (if required). On Thursday, Jan. 3,
2013, the APA Board directed the Negotiating Committee to make specific
contractual modifications to our 2012 CBA during the valuation phase outlined in
the MOU. Since these modifications have not been mutually agreed to, we will
communicate them in a separate message in the near future.

This MOU negotiation is just one
milestone in this process and will require approval of the two corporate boards
of directors as well as the approval of the bankruptcy court. It is our goal to
provide additional educational materials in the near future in order to answer
the many questions you may have associated with the MOU and the potential merger
process ahead.